India markets closed

Rupee drops 14 paise to 75.80 on trade worries, coronavirus scare

Mumbai, May 20 (PTI) The rupee depreciated by 14 paise to close at 75.80 against the US dollar on Wednesday as headwinds due to US-China trade tiff and worries over the second wave of coronavirus infection weighed on investor sentiment.

Forex traders said positive domestic equities supported the local unit, while sustained foreign fund outflows, US-China trade tiff and concerns over coronavirus pandemic weighed on the local unit.

At the interbank foreign exchange, the rupee opened at 75.60 but pared initial gains to finally close at 75.80, registering a fall of 14 paise over its previous close. On Tuesday, the rupee had settled at 75.66 against the US dollar.

The 30-share index settled 622.44 points or 2.06 per cent higher at 30,818.61, while the NSE Nifty rose 187.45 points, or 2.11 cent, to end at 9,066.55.

'The COVID-19 vaccine-trials temporarily excited the market. But there are headwinds due to ongoing US-China trade tiff and worries over the second wave of infection. Also, Reliance rights issue has opened today, and we can see some FII participation in it in coming days which may limit the fall in rupee,' said Rahul Gupta, Head of Research- Currency, Emkay Global Financial Services.

'Technically, the USD/INR spot is trading in a very tight range of 75.25-76, and we expect it to remain in this until there are major cues. Either side breakout will give further clarity over the trend,' he added.

Forex traders said the rupee pared early gains to close in the negative territory as US-China trade tiff weighed on investor sentiment.

US President Donald Trump on Tuesday said he now feels 'differently' about the trade deal he signed with China earlier this year. He said this while once again venting out his frustration with the Beijing leadership, accusing it of letting coronavirus spread.

The US and China had signed a deal in January. Under it, Beijing agreed to increase its purchase of US goods by USD 200 billion in 2020-2021.

'I feel differently now about that deal than I did three months ago,' Trump told reporters during a Cabinet meeting at the White House.

'We will see what all happens, but it's been a very disappointing situation. Very disappointing thing happened with China because the plague flowed in and that wasn't supposed to happen and it could have been stopped,' he said.

Traders further noted that investor sentiments remain fragile amid a sharp rise in COVID-19 cases.

Globally, over 49.13 lakh people have been infected by the virus and over 3.23 lakh have died.

In India, the death toll due to COVID-19 rose to 3,303 and the number of cases climbed to 1.06 lakh, according to the health ministry.

'Rupee traded weak as doubts hovered around coronavirus vaccine trial by Moderna Inc, which had seen risky assets rally last few days. Growing affected number in India weighed on the rupee more as it made low at 75.85,' said Jateen Trivedi, Senior Research Analyst at LKP securities.

Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was trading 0.02 per cent higher at 99.39.

Meanwhile, foreign institutional investors were net sellers in the capital market as they sold equity shares worth Rs 1,328.31 crore on Tuesday, according to provisional exchange data.

Brent crude futures, the global oil benchmark, rose 1.18 per cent to USD 35.06 per barrel.

The Financial Benchmark India Private Ltd (FBIL) set the reference rate for the rupee/dollar at 75.6638 and for rupee/euro at 82.6819. The reference rate for rupee/British pound was fixed at 92.5853 and for rupee/100 Japanese yen at 70.44. PTI DRR HDA